Financial markets are braced for a radical shift in economic policy and fresh question marks over a eurozone break-up, as Francois Hollande moves into the Elysee Palace on Monday as the first Socialist president of France for 30 years.

A confrontation between the new president and Angela Merkel, Germany's chancellor, is also high on the markets' worry list.

However leading economists believe Mr Hollande will attempt a damage limitation exercise to avoid increasing turmoil in a eurozone facing further upheavals, with result of this weekend's Greek election increasing speculation about an eventual break-up of the fragile currency bloc.

Mr Hollande's 'farewell to austerity' programme, which combines taxing the rich, raising public spending and lowering the retirement age, has raised the expectations of the French electorate about the end of the 'Merkozy' era.

But Ms Merkel is unlikely to cede ground in the face of Mr Hollande's demand for a re-writing of the eurozone fiscal pact.

Christian Jimenez, a fund manager at Diamant Bleu Gestion in Paris, said: "Hollande's victory has already been priced in by markets, however his promises made during the campaign have not been priced in, so there is risk on the downside if he stands his ground when he announces a first set of measures.

"There's a clear need to boost economic growth across Europe, no question, but the debate is on how to achieve that without spooking investors. All in all, Hollande won't be able to convince Merkel to soften her position on the need for austerity."

Chancellor George Osborne appeared diplomatically relaxed at Mr Hollande's victory. "I don't think it's a problem. He's not anti-austerity. He's made it very clear

Well, I wouldn’t suggest Government bonds, and there will be a short window where the media has enough folks believing a Democrat control of any one of the 3 parts of the legislative branch will produce a economic expansion, but don’t look for that to last past January.

12
posted on 05/06/2012 5:11:14 PM PDT
by Son House
(The Economic Boom Heard Around The World => TEA Party 2012)

He’s a socialiste, so he must tax the rich if he is to stay true to his ideology. Yes, there will be austerity, but it will be because of economic contraction from a shrinking private sector.
I don’t think that the markets have ‘priced this in’. The euro will drop and the EU will become unglued. Germans still want to save and they want a strong currency. This appears impossible now with Greece, Italy, Spain, Portugal, and now La France.

If they repudiate their debt, they won’t be able to borrow more- and what will the French masses do then. And if they repudiate their debt to a foreign power that is willing to employ “self help” in collecting what they lent France in good faith, this could easily lead to another war.

A lot of bad stuff can happen when you try to stiff someone for billions.

I don’t think that France is going to be able to tax themselves out of this mess, regardless of how much they soak the wealthy.

“Mr Hollande’s ‘farewell to austerity’ programme, which combines taxing the rich, raising public spending and lowering the retirement age, has raised the expectations of the French electorate about the end of the ‘Merkozy’ era.”

I think Germany will take the Netherlands, the Flanders region of Belgium, Austria, Finland and several eastern European countries with them if Germnay decides to leave Eurozone. And Norway, Sweden and Denmark may join them, too.

“From 1 January 1999, the value exchange rate of the French franc against the euro was set at a fixed parity of 1 EUR=6.55957 FRF. Euro coins and notes replaced the franc entirely between 1 January and 17 February 2002.”

— Wiki

They can’t print more unless they convince the EU to print more..

30
posted on 05/06/2012 5:52:42 PM PDT
by N3WBI3
(Ah, arrogance and stupidity all in the same package. How efficient of you. -- Londo Mollari)

“How in the heck in this day and age of ecomonic devastation do idiots elect socialists, if not for their own stupidity and greed?”

It’s rather simple....

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years.”
- Alexis de Tocqueville

Yep. France sees the answer to failed socialism as even more socialism. I think there will be downside to financial markets but this will drag on for a long time. I have moved quite a bit to bonds lately.

This is why the EU Commission was set up. Commissioners are APPOINTED by national governments to eliminate constituencies' demands for the treasury.

EU has not yet given the Commission fiscal authority (Ireland and Greece have).

The U.S.A. started on the right track when state legislatures elected Senators. The 17th Amendment did away with that just after income tax was introduced in the 16th Amendment and a few months before the Federal Reserve was established.

“Mr Hollande’s ‘farewell to austerity’ programme, which combines taxing the rich, raising public spending and lowering the retirement age, has raised the expectations of the French electorate about the end of the ‘Merkozy’ era. “

They will now tax and spend their way to prosperity. I just don’t know why somebody else didn’t think of this first.

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